SBP report reveals significant improvement in consumer confidence

ISLAMABAD: Consumers’ confidence in Pakistan surged by 14.9 per cent month-on-month in May 2024, reaching 37.7 points, according to the latest Consumer Confidence Survey (CCS) released by the State Bank of Pakistan (SBP).

The survey revealed notable improvements in both the Current Economic Conditions (CEC) index and the Expected Economic Conditions (EEC) index. The CEC index rose by 4.8 points to 36.6, while the EEC index increased by 5.0 points to 38.8 compared to the previous month.

Urban households saw their Consumer Confidence Index (CCI) improve by 3.9 points to 36.6, and rural households experienced a more significant rise, with an increase of 8.2 points to 41.5. Fresh households recorded a 6.4-point improvement to 38.0, while rotating households saw a modest increase of 1.8 points to 37.1.

The CCI, which assesses consumers’ confidence in the economy and their personal financial situation, is measured on a scale from 0 to 100. An index above 50 indicates an optimistic outlook, whereas a score below 50 reflects a pessimistic view of future economic conditions.

The May survey also highlighted a decrease in consumers’ inflation expectations, which eased by 5.4 points to 69.1. Expectations for food inflation over the next six months dropped by 6.9 per cent, non-food non-energy (NFNE) inflation fell by 5.7 per cent, and energy-related inflation decreased by 5.5 per cent.

Furthermore, consumers’ assessment of unemployment over the next six months improved, with the index dropping by 3.7 per cent to 70.3, down from 73.1 in April 2024. This indicates a more optimistic outlook for the labour market.

In contrast, the expectations index for interest rates fell by 5.6 per cent, from 72.7 in April to 68.7 in May.

This decline coincides with the central bank’s recent decision to lower its key policy rate by 150 basis points to 20.5 per cent, the first reduction in nearly four years, announced ahead of the country’s annual budget for 2024-25.

Consumer sentiment regarding the suitability of purchasing durable goods over the next six months improved significantly, with a 17.4 per cent increase from 28.3 in April to 33.2 in May.

However, consumers’ expectations about their future income a year from now deteriorated by 5.2 per cent compared to the previous survey in April.

Overall, the latest CCS results indicate a cautiously optimistic outlook among Pakistani consumers, reflecting improvements in current economic conditions and future expectations amidst easing inflation and a favourable policy rate adjustment.

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